Yesterday after the close, Google GOOG (GOOG) reported earnings of $9.56 per share, excluding items, compared to consensus of $10.78. Revenues came at $14.11 billion compared to the consensus forecast of $14.40 billion. Operating margins came at 28% compared to 33% for the same quarter in 2012.
As I listened to Google’s conference call, it struck me that there were at least five eerie similarities between Google now and Apple AAPL (APPL) when it was trading around $700.
String Of Top Line Misses
This is the seventh top line miss from Google. Apple had a string of top line misses before the stock price topped around $700. In my experience, it’s been more instructive to pay attention to the top line as a business barometer for technology companies. There has to be reasonable assurance that growth rate momentum, not just absolute growth rate, will continue in the future.
Decline In The Key Metric
The key metric for Google is cost per click (CPC). For the quarter, CPC for Google declined 6% year-over-year. Even though Google is in many businesses, Google’s main bread and butter is still search advertising, hence the importance of this metric.
When Apple was reaching $700, the most important metric in my model for Apple was the momentum of growth of iPhone sales. This metric had declined prior to the top in the stock. Even though Apple has many product lines, Apple’s main bread and butter is iPhone….Read more at Forbes
